Video - Hard Promises, Soft Promises Promoting Autonomy instead of Authority
This talk took place on September 20th 2016 at the @SFBTCMeetup in San Francisco, California. Are bitcoin payments irreversible? Many have criticized this as a "problem" for consumers. Some have gone as far as to design blockchains that are editable and give authority to a group to reverse transactions. In this talk, Andreas dissects the concept of irreversible agreements, hard promises and soft promises and the ties they have to systems of authority and autonomy.
MAN: I want to introduce Andreas Antonopoulos. The very first video I’ve actually saw explaining Bitcoin the way I understood was Andreas Antonopoulos’ video (0:00:08) author of Mastering Bitcoin and his new book The Internet of Money. Everyone please, (0:00:14) Andreas Antonopoulos.
Andreas Antonopoulos: Wow! Hey, San Francisco. I went to my first San Francisco Bitcoin meetup almost four years ago and there were 12 of us and for those who are watching this on video and can’t see it just to give them an idea can we please make some noise. What an amazing turnout! What an amazing opportunity! Thank you so much. I’m really humbled. Thank you for coming here today. Few people still banging on the door because they didn’t get it.
Is everybody here really excited about distributed ledger technology and what it can do for banking?
Earlier today (0:01:37) Accenture announced a patent they filed for the first editable Blockchain that can be modified resolving the fundamental problem we had in Bitcoin of immutability. And with their contributions and the contributions of other companies like that one by one we can solve the fundamental problems in Bitcoin such as decentralization, open access, lack of a central authority or counter-party risk, immutability and at some point in time assuming the concept of sound money. So, they invented something new, the editable Blockchain. I’m really glad some consultant got paid probably a couple of million dollars to invent that. You know for that kind of price they had give it a really good name because spreadsheet was already taken. I am amused by the fact that in this space as new people joined they looked at Bitcoin, they looked at what this open, borderless, decentralized, censorship resistant systems are and they’re so alien, they can’t quite grasp why – why they are the way they are and so, the first instinct is to fix them. And one of the most common themes we’ve been hearing lately is that the fundamental problem with these open Blockchains is that they are immutable, that the transactions are irreversible and that will be the topic of today’s talk which I’m calling Hard Promises.
So, why is this a problem? We’re not accustomed to hard promises. Very few things in life are guaranteed, outcomes are not predictable, right? There’s a Chinese saying that says the sun, the moon and the truth will not be hidden for long. And if you think of the things that we can expect in a predictable pattern we have to look outside of human society. We have to look at things that are not affected by human emotion or relationships or agreements. We have to look at math, we have to look at physics, at the stars and those things are predictable, those things are unalterable. And what Bitcoin does is it takes mathematics and puts it at the heart of a payment system and re-introduces this concept of unalterable, predictable outcomes and this is totally alien because we’ve never done it in financial systems before. The initial reaction to that is “Well, that’s broken.” And there’s a fundamental misunderstanding there about what a Bitcoin transaction is and what it means for Bitcoin transaction to be irreversible. Because if you think of Bitcoin transaction as a payment then the concept of an irreversible payment seems a bit weird. What if you make a mistake? Who do you appeal to? How do you get a refund? What is the process? But a Bitcoin transaction isn’t a payment. A Bitcoin transaction is a program and it’s not the payment that is irreversible, it’s the program that is irreversible. What Bitcoin gives you is the ability to take a program and have that program execute exactly as written guaranteed with all of its parameters and that is unalterable. Once it’s been specified by the sender that program will execute exactly as specified, predictably everywhere the same. It cannot be appealed, it cannot be reversed, it cannot be censored.
Now, if you make that program say “I am paying John who I’ve never met in my life to ship me something over UPS” and then John who isn’t actually named John doesn’t ship then that program will execute and now you’ve got something rather problematic, an irreversible payment but you don’t have to write that program. In fact within the programs inside Bitcoin we can implement all kinds of layers. What it gives us is a hard promise. The program will execute exactly as specified but the beauty in distributed systems is if you start with the foundation that offers you a hard promise, a system of constraints on what will happen, you can relax those, you can loosen that promise. You can write a script that says “I will pay John based on a multi-signature transaction with a third-party Escrow agent and an automated refund in 30 days unless a signature from UPS shows that the package was delivered and no dispute has occurred in the meantime.” Not so scary anymore. Now the payment can give you all of the consumer protection you want with a few fundamental differences. The sender chooses the counter-party that they add to the program. It’s not selected for them. The recourse is specified in advance and it is absolutely guaranteed as a hard promise that it cannot be violated by anyone – not John, not some other third-party, some intermediary, not some authority that wasn’t involved in the original transaction. So you take a hard promise and because it’s programmable money you soften it to introduce exactly the measure of consumer protection that the payer wants to and they have full control over that. But just as a distributed system that has hard constraints can be softened you can’t say the opposite. A system that only delivers soft promises can never deliver a hard promise. If you have a system of payment which is subject to review, revision, censorship, authorities, courts, others that system can never guarantee anything. Every promise it delivers can be broken. Every promise can be reversed.
How many people here have money in the bank? None of you have money in the bank. You have all extended mostly unsecured loan for a pathetic level of interest to a bank that is holding that money as their own and using it to earn very high interest from other people and maybe, maybe if you walk up to an ATM or bank teller maybe you can get some of that back unless you’re a Greek, Argentinean, Cypriot, Venezuelan, Ukrainian, Brazilian and the list goes on and on and on through the decades because those promises are soft. And you could appeal to a system of courts where the ironclad rule of law will deliver swift, efficient justice to all maybe in this country. How many countries where that’s not even a consideration? And what is the difference between those countries and this country? They know the rule of law is a myth. They know that influence, power, money, connections, political power and at the end of it violence can override the rule of law. And here the difference is we still believe the illusion that the rule of law exist but those who benefit from it the most are quite clear that even here money, influence, political power, connections can swiftly override that.
Today the head of Wells Fargo was testifying in front of congress because over a period of a decade the entire consumer credit department fabricated credit lines without the consent of the bank, banking people, the customers, fabricating PINs, fabricating lines of credit, damaging the credit rating, creating spurious charges all to drive the bottom line, that fraud earned the CEO 200 million dollars in capital appreciation. You’ll be please to know that CEO as we speak is facing jail time though, of course she is (0:12:36) come on, where have you been? No, he fired five thousand three hundred lower level $12.00 an hour employees, the head of the department walked away with a 125 million dollars severance and Wells Fargo was fined 185 million dollars which isn’t even the profit that one person, the CEO made over this ten-year period. Nothing will happen and this is in the most over-regulated, protected industry with oversight and congressional hearings in the country with the most stellar record of the rule of law; soft promises, empty promises.
When you see people who are complaining about the fact that Bitcoin can deliver hard promises you have to start thinking what are they afraid of? What is it exactly that makes them think that if you have a system the record thinks on a Blockchain in a way that no one can modify that creates unalterable, predictable outcomes what is so terrifying about that? Because when they speak about it they can’t drop these images of defrauded consumers and chaos. Après nous, le deluge – beyond me comes the deluge said King Louis XV warning his subjects that if they had a revolution he was authority and in the absence of authority anarchy would prevail.
During the revolutionary war here King George warned his subjects I am order and on the other side privateers, murderers, scoundrels like George Washington are going to lead you into chaos because without authority the alternative is chaos. This is the narrative. This narrative has infected minds for centuries. And this narrative assumes that the human condition lies on a single line where down into the left zero order, zero authority. As you go up the line authority leads to order and so if you believe in this then the idea of a system that has no authority automatically equate with sliding down the line into chaos, disorder.
I have news for you it’s not a line, it’s a Cartesian plane. And the opposite of authority is autonomy and what the Blockchain demonstrates is a system that substitutes authority with autonomy and what it gives us is not chaos. What it gives us is the highest of order which we have never seen before. It gives us predictable outcomes that are not subject to the whim of authority. If you’re on that line you can’t see that there are other options. And we see societies destroyed by this very trade-off, this fake trade-off because when order starts to diminish in a society the people called for more authority and we know where that ends. More authority and more authority and more authority and that authority corrupts and eventually it kills.
In Venezuela we’re seeing the end results today, maximum authority. Complete collapse of social order. The line flattens. Authority is maximum, order is zero and what do the leaders ask for? More authority.
This technology allows us to re-envision the social order, creating systems that instead of authority use autonomy to deliver order but it’s better than that because this form of order is unprecedented.
If every individual has the ability when they create a transaction to specify exactly the conditions under which that transaction will be executed and then be absolutely guaranteed that those conditions will be met, what is the value of that to individuals? What kind of world does that create? It certainly creates a world in which the people who are clinging to authority are both terrified and more importantly irrelevant of it. But we’ve seen this before.
What other systems create outcomes that cannot be changed. One of my favorite examples comes from the internet. The internet actually has this quirk in it that we’re now about 10 or 15 years into realizing it creates a set of unalterable outcomes. Once something is published on the internet it cannot be unpublished, right? We’re now the first generation living with the reality that what happens on the internet stays forever on the internet. It cannot be removed, it cannot be censored and the more you try the more it propagates. Now this was not lightly received by those in authority and in many countries today there is a desperate fight to ensure that things can be unpublished and that fight is a losing fight because they can’t.
The internet has given us a glimpse of what it means to have unalterable system and who has it affected most. Has it affected us? Who are becoming aware of this and much more careful and flexible about what we publish or has it affected most those in authority who do not want their secrets, their lies, their crimes revealed and published on a system that cannot be silenced. The internet gives us a glimpse of what it means to create unalterable outcomes.
We have no idea how valuable this property is. I think it’s extremely value. So why in this environment would you create a mutable ledger because it brings back the comfort of authority. But what it also does is it feeds the legitimacy, the power and the control of whatever hierarchy organization you’ve put in place to decide what gets altered and what doesn’t.
The Blockchain gives us a network-centric system where there is no authority and the outcomes are predictable. To replace that you have to put in place a very traditional industrialized society model of hierarchies and appeals and positions of power where they get to decide what gets written and more importantly what gets erased.
History is written by the victors and this is going to be sold to people as a way to protect your own safety. You’re not good enough, smart enough, sophisticated enough to decide what program you want to embed in your transactions to create unalterable outcomes, you need protection. But let me ask you we have a system that already gives us reversible transactions. It gives us a system of appeals, it gives us a system of recourse, whose transactions gets reversed? How many times does a transaction that takes money out of your pocket and put in the pockets of someone who works in a banking institution or in a position of authority, how many times does that transaction gets reversed? And how many times does the transaction where you’re trying to contribute to a political cause to support a political party to donate to WikiLeaks, how many times is the mechanism of recourse used as a mechanism of control? That is the inevitable outcome when you put a hierarchy on top and they get to decide what gets written and what gets erased. They write the things that filled their pockets and they erased the things that offend them. The system of recourse doesn’t protect consumers. It’s not even a factor for most consumers.
When Wells Fargo takes out $35.00 to open a credit card that you never asked for it takes 10 years of a congressional inquiry and maybe, maybe you’ll get it back, maybe they’ll fix your credit score and no one will go to jail.
Soft promises feed hierarchy, hard promises feed autonomy and what we’ve built here is a system of hard promises that can be softened to give you all the flexibility you need to so your own consumer protection on your own terms that you specified and that is terrifying to those who are in a position of authority and it’s absolutely exhilarating to everybody else. Thank you.